I need to adjust allocation from a major name broker where I am mainly in cash and short term teasuries but cannot decide about asset allocation or method to accomplish this.
I have done quite a bit of reading but still feel unable to decide between a "typical" boglehead strategy and the permanent portfolio.
I think I may need major help from Vanguard to get this done since I am at work about 50-60 hours a week and cannot make very many calls etc during work hours.
I need to invest a substantial amount and am torn between dcaing into investment categories over a year or two and just biting the bullet and readjusting.
I value the opinions here a great deal-thoughts?

It is rarely a good idea to invest in a hurry. The most cautious approach would be to keep all your money in cash until you decide on your allocation. A slightly less cautious approach would be to start with a 25/0/75 stock/bond/cash allocation until you decide on your desired allocation. The reason I picked 25% in stocks in because that is what the permanent portfolio uses (and smaller than most other traditional allocations) so whatever you choose you wouldn't have to worry about capital gains tax. Take your time and keep reading and asking questions on the forum.

I would like to but spouse works way more than I do and not interested very much. I am not planning to stay with broker due to past history of putting variable annuities in an IRA and other issues.
I do really value your advice on the best way to proceed; I will be the one taking care of this. We both have IRAs and other accounts.

With limited time to manage your investments you may want to consider moving them to Vanguard and placing it all into Target Retirement fund using a Target fund date based on your goals and time horizon. Contact Vanguard for the transfer - they will handle everything.
If you have substantial assets to move (≥ $500,000) you would qualify as a Voyager Select client and be able to talk to a Vanguard financial advisor (for free) to determine the best course for your personal program, now and in the future when you need help.

If you are familiar with the Permanent Portfolio concept and feel you can emotionally handle the periodic rebalancing that is required, then this is also a plan that has promise and with a good real time history of success. This can also be done at Vanguard using Vanguard funds and ETFs and the Vanguard brokerage account.

I prefer a "typical" boglehead portfolio over the permanent portfolio, because I'm not a fan of vastly overweighting gold (compared to market weights).

If you believe stocks will do better than bonds over the long-run and don't have any strong countervailing issues, then lump sum makes more sense than DCA. Many people have psychological issues with lump sum investing, so DCA helps, but it's a second best solution. That being said, DCA'ing over a year or two isn't terrible. If you don't believe stocks will beat bonds, why invest in them?

Why would you need major help from Vanguard to implement your strategy? Isn't it essentially a matter of instructing the broker to move the money, then telling Vanguard which funds you want?

I realize more detail may help--
I lost confidence in broker in mid 2008 and went to cash-just lucky in some ways on that move!
After everything that has occurred in the financial enviroment I am struggling with deciding about how to proceed. We are mostly interested in capital preservation and are both risk averse at this point. I think it is unclear as to whether we face inflation or deflation in the future and wish to try to navigate using a prudent allocation strategy.
I am interested in the experience of others in moving multiple accounts to Vanguard. How much time does it take or can someone at Vanguard do most of it once you start the process?
I am also concerned about putting everything with one company. Is it better to divide between Vanguard and, for example, Fidelity and Schwaab just to diversify risk of "everything in one basket"?

For the risk adverse - and a position I can clearly identify with - short-term treasury bonds make a wonderful secure resting place. As Harry Browne repeated often, “when in doubt ere on the side of safety.”
There are many who are wondering about the inflation / deflation question, so you are not alone there.
I have moved multiple accounts to Vanguard including Roth and 403(b) accounts, and it took very little time and they handled it or provided me with information I needed to do so myself. That included a conference call to my former account holder.
Mutual fund companies are closely regulated In the USA, and I would not fear moving it all to one company, especially Vanguard. (I am not associated with Vanguard other then being a client).

milestogo wrote:I am interested in the experience of others in moving multiple accounts to Vanguard. How much time does it take or can someone at Vanguard do most of it once you start the process?

I don't have direct experience with Vanguard, but my wife never complained about how long it took.

I moved several accounts to WellsFargo. I printed out forms, filled them out, and mailed them in. Accounts were transferred in less than 2 weeks. One needed a recent account statement from your existing accounts.

I did not move ALL accounts at once because I did not want the new institution to have a chance of confusing any accounts with the same owner or address. That is, I moved my IRA, then my taxable. I transferred "in kind".

I think you should have very good statements from your existing broker with cost basis, etc before pulling the plug as I think after you are gone, they will send you only the 1099s they need to and will not be helpful in determining previous transactions of yours.

I am also concerned about putting everything with one company. Is it better to divide between Vanguard and, for example, Fidelity and Schwaab just to diversify risk of "everything in one basket"?

Lots of folks are fine with everything at Vanguard. I am not one of those folks. My favorite place is WellsFargo. I also have accounts at TDAmeritrade, Vanguard, Fidelity, et al.

OP, you could paint a personal picture of your age, assets, risk tolerance, liquidity, etc, and get some outstanding suggestions from the regulars here. With luck the suggestions might even coalesce around a modal response.

We are both in our low fifties.
My IRA-about 400k-treasuries
His IRA-about 800k-treasuries and 2 variable annuities
-1 annuity is 50k and the other is 100k
joint taxable accounts-in the low seven figures - treasuries and mms
529 accts-150k in cds-could tap this for tuition for 1 child out of 3 but have not yet
no debt

We are bothing working at present but might like to change this to other activities in about 3-4 years. Spouse's job will result in a defined benefit pension for spouse sufficient to cover 3/4 of our living expenses in 3 years if he retires then. That presumes db plan is still around in its present form.

Vanguard's advice likely will not endorse the permanent portfolio. If you are torn between the Boglehead methods and the permanent portfolio, why not set up two portfolios, one each way, and see how it goes for a while. The permanent portfolio has had a great track record but personally long bonds and gold just aren't my cup of tea.

The cleanest way to move money is to open an account and fill out the transfer paperwork with the new brokerage account. They will then process the transfer and can move everything "in kind" so you'll have your treasuries magically show up over there one day. Unfortunately, your current broker won't like seeing a million bucks plus leave their clutches so you can expect them to call and try to talk you out of it and them to drag their feet. You may have to prod them a little to get the move done.

You can look at the fees and penalties on your variable annuities. Vanguard may be able to help you transfer them to a lower fee option or your best bet may be to just cash them in. Any FA or broker that puts a VA into an IRA is just trying to steal money from you. You need to get your money away from them ASAP.

I have no interest in the "permanent portfolio" personally but some people go gaga over the gold. Right now that's hot so it sucks people in. If you want some commodity exposure there are some ETFs that cover this asset class but I wouldn't put 25% into this either. I'm more a traditional bogleheader when it comes to my portfolio.

milestogo wrote:We are both in our low fifties.
My IRA-about 400k-treasuries
His IRA-about 800k-treasuries and 2 variable annuities
-1 annuity is 50k and the other is 100k
joint taxable accounts-in the low seven figures - treasuries and mms
529 accts-150k in cds-could tap this for tuition for 1 child out of 3 but have not yet
no debt

We are bothing working at present but might like to change this to other activities in about 3-4 years. Spouse's job will result in a defined benefit pension for spouse sufficient to cover 3/4 of our living expenses in 3 years if he retires then. That presumes db plan is still around in its present form.

You are on the right track. Keep asking questions and providing information (more information is needed for definitive advice to be given). For example, what are your marginal income tax rates? What state do you live in? Short term treasurys and cash may not keep up with inflation over the long run - do you want to own some percentage of stocks as a hedge against inflation? What about TIPS?

It is typically insane to believe that a variable annuity (VA) belongs inside a tax-advantaged account like an IRA. Who chose that investment vehicle? Is someone making money from that decision? What is the VA invested in - stocks, bonds, money market funds, REITs? Check the costs, read the prospectus and all other documents. You may be simply transferring your hard-earned money to someone else.

There are many knowledgeable people on this forum who can help you - but solid help can be provided only if you provide all necessary information.

It is difficult to properly assess your current situation with precision. You appear to be risk-averse - and that's fine. For starters, I suggest that you at least think about an asset allocation of 20% equities (Total US Stock Market and Total International) and 80% intermediate term bonds (TIPS and nominals tailored to your financial and tax situation). After all, you could live for another 50 years.

Last edited by kenner on Sun Sep 12, 2010 9:17 am, edited 2 times in total.

Once you decide what to do, the moving of money around is relatively trivial and very easy.

I have not seen any evidence that you have decided what to do or that you have a plan. Perhaps the easiest setup for a portfolio spread across taxabld and tax-advantaged accounts is just 3 asset classes: Total US Stock Market, Total International Stock Market, and Total US Bond Market. But you still have to decide what percentage to put into each of these asset classes. Only then should you pick the specific funds. And later you can dance among them a little bit by adding other specific asset classes like TIPS, REITs, small cap foreign, and/or US small cap value.

So what's your plan? If you can't decide, then staying in Treasuries is not bad at all. And you should consider finding another financial planner/advisor who can help you, but keep the cost under 0.25% of assets under management or $3000 fixed a year and make sure they put you in low-cost passively-managed funds.

Last edited by livesoft on Sun Sep 12, 2010 9:16 am, edited 1 time in total.

I need to adjust allocation from a major name broker where I am mainly in cash and short term teasuries but cannot decide about asset allocation or method to accomplish this.

I have done quite a bit of reading but still feel unable to decide between a "typical" boglehead strategy and the permanent portfolio.

I lost confidence in broker in mid 2008 and went to cash-just lucky in some ways on that move!

After everything that has occurred in the financial enviroment I am struggling with deciding about how to proceed.

We are mostly interested in capital preservation and are both risk averse at this point.

We are both in our low fifties.

My IRA-about 400k-treasuries
His IRA-about 800k-treasuries
and 2 variable annuities - 1 annuity is 50k and the other is 100k
joint taxable accounts-in the low seven figures - treasuries and mms
529 accts-150k in cds-could tap this for tuition for 1 child out of 3 but have not yet

We are bothing working at present but might like to change this to other activities in about 3-4 years. Spouse's job will result in a defined benefit pension for spouse sufficient to cover 3/4 of our living expenses in 3 years if he retires then.

Miles,

Lots of uncertainty and things going on there, eh?

Decide how much Equity risk you want/need. Without this personal decision, no one will be able to help with specific details.

Since both are low 50s in age, do your numbers (last bullet point) include health insurance? Assuming it does, with 3/4 of living expenses covered, and 1/4 to worry about, the portfolio mentioned above should be significant to cover.

Put the uncertainties to rest by first determining a conservative AA (#1) that helps you sleep at night. Than, you can begin the process to reduce those long hours at work and to start enjoying yourselves.

1) We'll need $35,000 per year from age 55 to "the end" to cover what is not covered by DB plan and SS.

and

2) We also will need to spend $X per year from 2011 - 2029 for college for Y number of kids.

Once you have the goals set, you can do some pretty quick calculations [in 5 minutes] with the amount of money you have now to figure out what kind of return you actually need to reach your goals. It appears that you've got [roughly] $2 million in assets so you may not need a return much higher than inflation, which would entail lots of bonds like Treasuries and TIPS.

That article illustrates the main problem with this sort of planning - it depends on being able to predict reasonable withdrawal rates and investment returns. Alas, while we can guess, our guesses may be off by a lot.

For example, Ferri estimates that treasuries will return 6% and corporates 7%. 10 year treasuries are now yielding 2.8%. This sort of issue can have a major effect on results. Or he says a 5% withdrawal rate is safe. Hard to tell if he means inflation adjusted or not. If inflation adjusted, he's above historical studies that show 4% as safe (and which could be overly optimistic for the future). If not, then real withdrawals decrease every year, which is probably not what people expect.

That article illustrates the main problem with this sort of planning - it depends on being able to predict reasonable withdrawal rates and investment returns. Alas, while we can guess, our guesses may be off by a lot.

For example, Ferri estimates that treasuries will return 6% and corporates 7%. 10 year treasuries are now yielding 2.8%. This sort of issue can have a major effect on results. Or he says a 5% withdrawal rate is safe. Hard to tell if he means inflation adjusted or not. If inflation adjusted, he's above historical studies that show 4% as safe (and which could be overly optimistic for the future). If not, then real withdrawals decrease every year, which is probably not what people expect.

All good points richard, which is why I like Bodie's Worry Free investing approach for your baseline retirement expenses. I just thought Rick's article would a shorter read than Bodie's book for the busy OP.

"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" - Upton Sinclair

I appreciate all the answers so far; I do have some reading time and will be able to read 3-4 books over the next 2-3 months.
Any advice on the books most likely to be important for my particular project is welcome. I have looked at the reading list but it has a large number of choices!
We are lucky about health insurance; if/when my spouse retires the db pension has health insurance for a reasonable amount for both of us as well as dependent children. The plan is allowed to change this but my spouse would likely continue to work rather than have to purchase individual health insurance; this is a major issue to him.
I do not have to hurry to move accounts other than my discomfort with the present broker; once I learned more about variable annuities (from reading here!) I realized he had not served us well. Both of these are approaching the point where there is no surrender charge in 2-3 years. At present they are about 10% below face value in money market funds. I am unsure how to handle these inside an IRA.
At this point I have control over all accounts and have given written instructions to the "advisor" to not move any money without my approval.
College wise-529 money should more than cover it. Kids have been told to either keep the cost under 50K or get scholarships. So far so good... :lol: Only 1 kid more to go...
Again thanks to all for your input about our situation.

milestogo wrote:I appreciate all the answers so far; I do have some reading time and will be able to read 3-4 books over the next 2-3 months.
Any advice on the books most likely to be important for my particular project is welcome. I have looked at the reading list but it has a large number of choices!

Start with "The Bogleheads Guide to Retirement Planning".

We are lucky about health insurance; if/when my spouse retires the db pension has health insurance for a reasonable amount for both of us as well as dependent children. The plan is allowed to change this but my spouse would likely continue to work rather than have to purchase individual health insurance; this is a major issue to him.

Smart man.

I do not have to hurry to move accounts other than my discomfort with the present broker; once I learned more about variable annuities (from reading here!) I realized he had not served us well. Both of these are approaching the point where there is no surrender charge in 2-3 years. At present they are about 10% below face value in money market funds. I am unsure how to handle these inside an IRA.

If you post all relevant information, you will receive help that may save your family a lot of money.

At this point I have control over all accounts and have given written instructions to the "advisor" to not move any money without my approval.
College wise-529 money should more than cover it. Kids have been told to either keep the cost under 50K or get scholarships. So far so good... :lol: Only 1 kid more to go...
Again thanks to all for your input about our situation.

milestogo wrote:We are both in our low fifties.
My IRA-about 400k-treasuries
His IRA-about 800k-treasuries and 2 variable annuities
-1 annuity is 50k and the other is 100k
joint taxable accounts-in the low seven figures - treasuries and mms
529 accts-150k in cds-could tap this for tuition for 1 child out of 3 but have not yet
no debt

We are bothing working at present but might like to change this to other activities in about 3-4 years. Spouse's job will result in a defined benefit pension for spouse sufficient to cover 3/4 of our living expenses in 3 years if he retires then. That presumes db plan is still around in its present form.

the other big piece of needed info is your annual income requirements. If you need $20k, you have significantly less need to take risk than if you require $100k.

If $20k does it, you can put everything your IRAs in TIPs, your taxable in munis, and sleep well every night (note: I am not making this suggestion, just pointing out the option).

It appears to me that if he takes the db plan in 3 years we need a 2.5% rate on the taxable accounts to avoid tapping the IRAs early and continue our present living expenses as they are today with low inflation (about 2-3%). We could reduce expenses by selling our present home which in 3 years with last child at college will be larger than we want or need. We would also reduce some discretionary expenses but might travel more so think it is best to assume same expenses on a yearly basis over all.
It seems to me that a 1% return might require one of us to keep working at least part time.
One of my major concerns is to try to allocate to handle an increase in inflation-I remember the 70's.

milestogo wrote:It appears to me that if he takes the db plan in 3 years we need a 2.5% rate on the taxable accounts to avoid tapping the IRAs early and continue our present living expenses as they are today with low inflation (about 2-3%). We could reduce expenses by selling our present home which in 3 years with last child at college will be larger than we want or need. We would also reduce some discretionary expenses but might travel more so think it is best to assume same expenses on a yearly basis over all.
It seems to me that a 1% return might require one of us to keep working at least part time.
One of my major concerns is to try to allocate to handle an increase in inflation-I remember the 70's.

Is that a 2.5% rate of return nominal or after inflation?

"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" - Upton Sinclair

Nominal-the db plan is cola'd. I think I will have difficulty allocating more than 20-25% to equity etfs or index funds since the last 10 years have been flat and we are considering a relatively early retirement.
It appears to me that if the taxable accounts produce 2.5% I would have 50k pretax which should allow us to not invade principal. I should not have to use the IRA funds early at all. This does not completely allow for inflation to take off rapidly but I am unsure how to allocate for that possibility; that concern is part of my reason for an interest in the permanent portfolio. Do others think that type of allocation better addresses periods of higher inflation than we have seen lately?

milestogo wrote:Nominal-the db plan is cola'd. I think I will have difficulty allocating more than 20-25% to equity etfs or index funds since the last 10 years have been flat and we are considering a relatively early retirement.
It appears to me that if the taxable accounts produce 2.5% I would have 50k pretax which should allow us to not invade principal. I should not have to use the IRA funds early at all. This does not completely allow for inflation to take off rapidly but I am unsure how to allocate for that possibility; that concern is part of my reason for an interest in the permanent portfolio. Do others think that type of allocation better addresses periods of higher inflation than we have seen lately?

what is your reason for not wanting to invade principal? Is it protection from inflation, or do you need/intend to leave an inheritance?

milestogo wrote:It appears to me that if he takes the db plan in 3 years we need a 2.5% rate on the taxable accounts to avoid tapping the IRAs early and continue our present living expenses as they are today with low inflation (about 2-3%). We could reduce expenses by selling our present home which in 3 years with last child at college will be larger than we want or need. We would also reduce some discretionary expenses but might travel more so think it is best to assume same expenses on a yearly basis over all.
It seems to me that a 1% return might require one of us to keep working at least part time.
One of my major concerns is to try to allocate to handle an increase in inflation-I remember the 70's.

Your situation is baffling. You need help and you appear to want help, but you have failed to disclose the information necessary to allow us to help your family.

We cannot create a budget for you, but, given the correct information, we can help you reach your financial goals. My guess is that your investments are woefully under-diversified, tax-inefficient and wasteful (particularly the variable annuities).

One idea is that the nominal value of the investment does not decrease. This idea is faulty as one should probably be looking at the real value not the nominal value.

A different idea is that wealth is measured in "shares" of things and the principal is not being invaded if one does not sell shares. This idea is faulty in that it ignores that the actual wealth may be declining in nominal and/or real terms.

Still another idea, which is how I think of portfolio wealth, is that a withdrawal from a portfolio is a withdrawal from a portfolio and may be thought of as an invasion of principal. In other words, failing to reinvest earnings is liquidation just as much as any other sale of shares and withdrawal of proceeds. This approach makes sense because withdrawing and spending interest and dividends attacks the total return of the investment, and total return is the only complete accounting of the progress of a portfolio over time.

OK, you want to decide on an asset allocation. Since you have amassed a great fortune and are still amassing it by working in the highest tax bracket, I will assume that you need to keep working because you don't have enough to retire. You didn't say, but I guess your goal is to have $5 million by the time you retire.

Your asset allocation should be 40% stocks and 60% bonds. All your tax-sheltered accounts should hold only Vanguard Total Bond Market. Your taxable should have some Vanguard Total Stock Market, some Vanguard FTSE all-world ex-US large cap index and some Vanguard FTSE all-world ex-US small cap index in the ratio 2:1:1. That is 20% of portfolio, 10% of portfolio, 10% of portfolio.

The rest of your taxable account could be the Vanguard Intermediate Term tax-exempt bond fund unless Vanguard has a state-tax exempt bond fund for your state.

Now I just wrote the above because you have not decided what you want and it appears that you want someone to decide for you. I've been presumptuous and done just that.

kenner wrote:Give us the information on your variable annuities and all other investments (expense ratios, underlying assets, etc.) and you will receive top-notch advice.

There are no other investments. What's in the variable annuities is not so important right now since they are such a small part of the portfolio.

I agree that the VAs, at only about 5% of OP's portfolio, are not overwhelmingly important, but I still hate to see mis-allocation of $150,000.00. (In the investing world, 5% is widely recognized as significant). A 1% mis-allocation of that amount equals $1,500 per year- $60,000 over the next 40 years. That could be a pretty nice vacation.

If we watch the nickels and dimes, the dollars will take care of themselves.

livesoft wrote:OK, you want to decide on an asset allocation. Since you have amassed a great fortune and are still amassing it by working in the highest tax bracket, I will assume that you need to keep working because you don't have enough to retire. You didn't say, but I guess your goal is to have $5 million by the time you retire.

Your asset allocation should be 40% stocks and 60% bonds. All your tax-sheltered accounts should hold only Vanguard Total Bond Market. Your taxable should have some Vanguard Total Stock Market, some Vanguard FTSE all-world ex-US large cap index and some Vanguard FTSE all-world ex-US small cap index in the ratio 2:1:1. That is 20% of portfolio, 10% of portfolio, 10% of portfolio.

The rest of your taxable account could be the Vanguard Intermediate Term tax-exempt bond fund unless Vanguard has a state-tax exempt bond fund for your state.

Now I just wrote the above because you have not decided what you want and it appears that you want someone to decide for you. I've been presumptuous and done just that.

agree with this, except she also suggested that $50k pretax would meet 75% of their spending needs once they have the COLA DB going in 3 years so I don't know why she'd need/want $5m. maybe they're working for the fun of it?

I am reviewing the last few responses. Thanks!
They were helpful and I managed to take a couple of necessary steps today towards transferring our accounts. I just have to make it more of a priority and due to all of you I am moving ahaed with it.
I am leaning towards livesoft's suggestions on allocation as I can see the need to pay attention to the tax situation more carefully.
We don't need 5 million and we do still like work-at least sometimes :lol: but not as much as we used to.
I am considering TIPS as well; any thoughts on percentage or usefulness of TIPS for me? I have read some of the TIPS threads and they seem like a good choice to me.

My opinion on TIPS is that they are selling at all time highs right now and there is no reason to buy them right now. They really gain you nothing extra right now and you don't lose anything by not owning them, so don't bother to complicate your new portfolio with them right now. You already have decision paralysis now, so don't add to the burden. Perhaps in the future this will change.

In other words, you aren't hurting yourself by not owning any TIPS at the present time.

Since you and your spouse are obviously very busy and don't have time or desire to spend on making all portfolio decisions may I suggest that you contact Rick Ferri at Portfolio Solutions. He can invest your money for you and then maintain your target asset allocation. He is extremely low cost and is highly respected. Most people can manage their money on their own but not everyone should. It seems to me you may be better off focusing on your jobs that bring in such a high income and letting someone else help you make and maintain a plan.

Laura

The views presented are my own and not necessarily those of the Department of State or the U.S. Government.

Once you fill out the paperwork and your account at Vanguard goes over $1M you can expect a message from them offering to do a yearly investment assesment with an advisor. This is free.

I had this done and liked the way they do it. The advisor ended up telling me to stay the course (which isn't surprising because we'd read the same books). In your case, I think he's likely to give you some advice about asset allocation and funds to buy to achieve that allocation. They'll push Vanguard funds (of course) but they'll all be no-load, low expense. Unlike your old broker.